Ruth Lea contends that onshore wind is ‘quite uneconomic’ in her report for Civitas. She says that although the direct cost of onshore wind is close to that of fossil fuel sources, this comparison excludes the impact of integrating renewables into the electricity grid. When these costs are added, she contends, wind becomes wholly uncompetitive.
This assertion is entirely based on the work of Colin Gibson, a former National Grid engineer, who has made some informal estimates of the cost of integrating wind power into the electricity networks. He suggests that these costs are about £60 a megawatt hour, adding perhaps 70% to the cost of electricity from wind turbines. Ms Lea fails to mention that many, many other analysts and engineers have also estimated the extra costs of adding large volumes of wind power to the electricity system. In this note I suggest that these alternative sources support a view that Mr Gibson’s estimates are wrong by about a factor of four, meaning that Ms Lea’s contention that wind is a very expensive technology is based on shaky foundations.

The task of estimating the relative costs of electricity generating technologies is complex. The result depends critically on the assumptions we make about the cost of investment capital, the amount of bank debt that can be used, how long the generating plant takes to build, the cost of fossil fuels and a host of many other variables. The final numbers, usually expressed as pounds per megawatt hour of electricity produced are, at best, approximations.

Ms Lea uses as her source the figures produced by Mott McDonald, an engineering firm, in 2010. She should probably have the used the more tentative and up-to-date figures generated by Mott McDonald for the Committee on Climate Change in 2011. The 2011 numbers give ranges of estimates for the direct costs of all the main technologies, for both today and in the future. These figures suggest that onshore wind power is broadly competitive with nuclear power. Offshore wind is currently much more expensive but advances in technology are projected to make it competitive over the next few decades. Mott McDonald, whether in 2010 or in 2011, certainly doesn’t see direct costs of wind power as ‘quite uneconomic’ and, to be fair, neither does Ruth Lea.

Wind power is more costly to integrate into the grid than conventional power stations. There are three major types of extra charges and these incremental costs are not included in the Mott McDonald figures.

The impact of having to have spare capacity on hand to react to unexpected changes in the outputs of UK wind farms. (Even if the electricity network were entirely powered by large nuclear plants, the UK would still need this spare capacity, ready to ramp up to full power, because of the risk of a station ‘tripping’ and its power not being available to the National Grid. Wind farms are actually less risky than a single nuclear power plant)

The cost of having to construct power stations that are used only when the wind is not blowing.

Charges arising from having to construct new distribution lines to connect wind farms, often in remote locations or offshore, to the National Grid.

Mr Gibson’s work, on which Ruth Lea entirely relies, suggests that the cost of these extra measures is about £60 per megawatt hour.

Table 1

Spare capacity

£16

Power stations sitting idle

£24

Improvements to the grid

£20

TOTAL

£60 per megawatt hour

Other sources give very different figures for the unseen costs of wind generated electricity. From the many available, I have used two reports produced by consulting engineers and by electricity network specialists. As far as I can see the numbers in these reports are representative of the consensus view of wind integration costs.

I don’t claim that these numbers are right, but I do think that Ms Lea should have given reasons why this recent work is less appropriate to use than the rough estimates of a single individual, however competent.

(3) Energy Networks Strategy Group, Our ElectricityTransmission Network: A Vision for 2020, March 2009. This report estimates the gross cost of new transmission infrastructure to cope with dramatically increased renewables generation at £4.7bn. I turned this into a cost per megawatt hour using the calculator in Mr Gibson’s spreadsheet, thus ensuring reasonable comparability with the figure used in Ruth Lea’s paper.

The implication of the far lower costs in Table 2 is that we should add about 15-20% to the direct costs of wind power to properly account for the impacts of this source of electricity on the costs of the network as a whole, not 70%. This leaves wind as an entirely economic and carbon-saving technology. Did Ms Lea, a noted climate change sceptic, use Colin Gibson's very high figures because of her dislike for the renewables policy of the UK government?